Oral Pension Promises Found Insufficient for Plan Setup

March 16, 2007 (PLANSPONSOR.com) - A federal appellate court has ruled oral promises of pension coverage later committed to paper were not enough to create a legal pension program.

The 2 nd U.S. Circuit Court of Appeals agreed with the decision by U.S. District Judge Barbara Jones of the U.S. District Court for the Southern District of New York. that plaintiffThomas Guilbert had not proven his former employers had started a plan recognizable under the Employee Retirement Income Security Act (ERISA).

According to the appellate court ruling, Guilbert went to work for a print brokerage firm owned by a family friend in January 1992. Guilbert claimed that in employment discussions with the owners the month before, the owners promised that they would start a pension fund for him with an initial $39,000 deposit and would add $10,000 to the account each year.

One member of the family owning the business wrote down the terms of the pension on a legal pad, according to Guilbert, and he received numerous oral assurances that the pension plan had been set up. Guilbert also submitted the company’s tax returns indicating the company took certain tax deductions for “employee benefit programs.”  

Eight years later, according to the ruling, the print brokerage business failed

However, even taken together, Circuit JudgePeter Hall ruled thatGuilbert’s evidence did not prove an ERISA plan had been put into place from which he was owed benefits.Hall noted noting that an ERISA plan is established only if, from the surrounding circumstances, a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.

Hall, in writing for the 2 nd Circuit panel, asserted: “we conclude that no reasonable fact finder could find that defendants established or maintained” a pension plan under ERISA.”

The 2nd Circuit ruling is  here .

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